ACA Urges FCC To Confront Broadcasters On Retrans Price Fixing

Relying on clear and convincing evidence in the record, the American Cable Association called on the Federal Communications Commission to protect the television viewing public by confronting rampant price fixing by broadcasters before ACA members must start a new round of retransmission consent negotiations with hundreds of commercial broadcasters in October.

In June 27 reply comments filed with the FCC, ACA also urged the agency to sweep away barriers erected by networks and local stations that effectively ban cable operators from serving consumers with out-of-market signals as they are entitled to do under longstanding federal policy designed to promote access to significantly viewed stations and others stations providing important information deemed distant by an advertising research company.

"To protect consumers from skyrocketing retransmission consent fees and greater service disruptions, the FCC must outlaw the growing practice of separately owned TV stations in the same market coordinating their negotiations for carriage fees in an effort to extract monopoly rents from local cable operators. Outright prohibitions and other hurdles imposed by broadcasters on ACA members curtailing access to out-of-market stations similarly must be abolished as restrictions on choice repugnant to the public interest and contrary to longstanding policy positions of Congress and the FCC," ACA President and CEO Matthew M. Polka said.

ACA stressed the need for reform with the annual cost of retransmission consent expected to double by 2017 to $3.6 billion, according to SNL Kagan. The customers of small and midsize cable companies, largely defenseless against the market power wielded by local broadcasters, will end up shouldering a disproportionate amount of these exploding TV signal carriage costs. ACA has urged the FCC to investigate and address rampant price discrimination against smaller cable operators.

ACA underscored the need for FCC action in the near term because thousands of carriage contracts are to expire on Dec. 31, 2011. Retransmission consent contracts are typically negotiated triennially.

"Broadcasters are poised to execute their strategy of blacking out signals until their outrageous cash demands are met. New rules of the road that curb broadcasters' misconduct should be adopted in time to protect consumers from losing signals if their pay-TV providers are forced to decline the ‘take-it-or-leave-it' offers of price-gouging TV station owners," Polka said.

ACA highlighted widespread retransmission consent abuses in a new round of comments intended to help guide the direction of the FCC's latest and probably most significant review of its broadcast carriage rules in nearly 20 years. ACA, a retransmission consent reform advocate for nearly a decade, applauded the FCC's decision in March to examine the rules governing retransmission consent.

ACA argued that current retransmission consent rules contribute to the misallocation of capital by siphoning funds from independent cable operators into the pockets of TV stations exploiting or performing end-runs around badly outdated laws and regulations. This dynamic not only raises the cost to consumers to view broadcast programming on cable but also depletes funds needed to expand the availability and performance of broadband services that are greatly in demand as essential tools of learning, commerce and communications.

In its FCC comments, ACA documented some of the ways broadcasters seek to gain insurmountable bargaining leverage over ACA members. In reaction to broadcaster claims that the FCC lacked evidence of occurrences of coordinated negotiation of retransmission consent, ACA confirmed and detailed 36 pairs of broadcasters involved in coordinated negotiations in 33 markets -- providing the names of the broadcasters and the individual markets involved -- that ACA members have experienced in the past three years.

In light of this data-driven evidence of broadcaster misconduct, ACA called on the FCC to adopt a rule that independently owned TV stations in the same market engaging in coordinated bargaining are per se violations of their legal obligation to bargain in good faith. Forcing TV stations in the same market to bargain on their own is crucial given that cable operators have reported that they pay less for retransmission consent when they negotiate with one station at a time as opposed to two, and that the harm is exacerbated when the two are affiliates of ABC, NBC, CBS and FOX. ACA pointed out that coordinated negotiations lead to greater consumer disruption during negotiation impasses because consumers would simultaneously lose access to two broadcast stations, instead of just one.

ACA noted that in responding to broadcaster collusion, the FCC should be aware that TV stations told they must not engage in coordinated negotiation by contract could evade the prohibition through less formal channels, such non-binding agreements not to sign carriage deals until the two stations involved have obtained a suitable fees structure. ACA urged the FCC to prohibit both formal and informal forms of coordinated negotiations.

ACA also urged the FCC to focus on the consumer harms taking place with regard to cable carriage of distant broadcast signals. In this regard, ACA called for a per se rule prohibition on any TV station or broadcast network that interferes with cable operators' right to carry, and consumers' legal right to view, distant TV signals. ACA informed the FCC that TV stations are both withholding retransmission consent unless cable operators agree not to carry any out-of-market stations and relinquishing to their network their right to grant out-of-market station carriage rights to a cable operator.

"TV stations are ganging up against ACA members to squeeze as much money as possible from our customers and also strengthening that monopoly power by denying cable carriage of distant signals otherwise permissible under FCC rules," Polka said. "If a clearer case for pro-consumer regulatory reform exists, I am unaware of it."